American Express Second Quarter Earnings from Continuing Operations Rise 13%; Revenues up 14% on Record Cardmember Spending; Nearly 2 Million Cards-in-Force Added in the Quarter.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- American Express American Express (NYSE: AXP), sometimes known as "AmEx" or "Amex", is a diversified global financial services company, headquartered in New York City. The company is best known for its credit card, charge card and traveler's cheque businesses. Company today reported second quarter income from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the of $972 million, up 13 percent from $860 million a year ago.
(Millions, except per share amounts)
Quarters Ended Percentage Six Months Ended Percentage
June 30, Inc/(Dec) June 30, Inc/(Dec)
-------------- ---------- ---------------- ----------
2006 2005 2006 2005
------ ------ ------- -------
Revenues $6,878 $6,020 14% $13,210 $11,660 13%
Income From
Continuing
Operations $ 972 $ 860 13% $ 1,848 $ 1,605 15%
(Loss)/Income
From
Discontinued
Operations $ (27) $ 153 # $ (30) $ 354 #
Net Income $ 945 $1,013 (7%) $ 1,818 $ 1,959 (7%)
Earnings Per
Common Share -
Basic:
Income From
Continuing
Operations $ 0.80 $ 0.70 14% $ 1.51 $ 1.30 16%
(Loss)/Income
From
Discontinued
Operations $(0.02) $ 0.12 # $ (0.02) $ 0.29 #
Net Income $ 0.78 $ 0.82 (5%) $ 1.49 $ 1.59 (6%)
Earnings Per
Common Share -
Diluted:
Income From
Continuing
Operations $ 0.78 $ 0.69 13% $ 1.48 $ 1.27 17%
(Loss)/Income
From
Discontinued
Operations $(0.02) $ 0.12 # $ (0.03) $ 0.29 #
Net Income $ 0.76 $ 0.81 (6%) $ 1.45 $ 1.56 (7%)
Average Common
Shares
Outstanding
Basic 1,217 1,231 (1%) 1,224 1,235 (1%)
Diluted 1,242 1,254 (1%) 1,250 1,259 (1%)
Return on Average
Total
Shareholders'
Equity* 29.8% 23.1% 29.8% 23.1%
----------------------------------------------------------------------
* Computed on a trailing 12-month basis using reported net income
over average total shareholders' equity (including discontinued
operations) as included in the Consolidated Financial Statements
prepared in accordance with U.S. generally accepted accounting
principles (GAAP).
# Denotes a variance of more than 100%.
Diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of from continuing operations were $0.78, up 13 percent from $0.69 a year ago. Including results for businesses that the Company has spun off or sold during the past year, net income for the second quarter totaled $945 million, down 7 percent from $1.0 billion a year ago. Net income per share on a diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. basis was $0.76, down 6 percent from $0.81. The Company's reported return on equity (ROE A fictitious surname used for an unknown or anonymous person or for a hypothetical person in an illustration. A lawsuit is generally named for the persons who are parties to it. ) was 29.8 percent, up from 23.1 percent a year ago. Pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma ROE, which is based on continuing operations, was 33.1 percent. (For further information about pro forma ROE, see the "Pro Forma ROE" section below.) Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: revenues rose 14 percent to $6.9 billion, up from $6.0 billion a year ago. Consolidated expenses totaled $5.4 billion, up 11 percent from $4.9 billion a year ago. "The second quarter results were driven by record spending on American Express cards with strong growth among consumers, small businesses and corporations," said Kenneth I Kenneth I (Kenneth mac Alpin), d. 858, traditional founder of the kingdom of Scotland. He succeeded his father, Alpin, as king of Dalriada (the kingdom of the Gaelic Scots in W Scotland) and c. . Chenault Chenault or Chennault is a surname, and may refer to:
This page or section lists people with the surname Chenault. , chairman and chief executive. "Spending on our network, which includes both proprietary and bank-issued cards, was consistently strong in all regions worldwide and double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. revenue growth was well above our long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. target of 8%. "Our investments in business building initiatives generated excellent returns. We expanded our customer base, adding 1.9 million cards-in-force during the last three months, and more than 7 million since this time last year. "Overall credit quality remained strong and the underlying momentum of our business continues to be excellent as we enter the second half of the year." Results from continuing operations for the quarter included the following significant items: --A $144 million ($131 million after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. ) net gain related to the completion of the previously announced sale of the Company's card and related operations in Brazil Brazil (brəzĭl`), Port. Brasil, officially Federative Republic of Brazil, republic (2005 est. pop. 186,113,000), 3,286,470 sq mi (8,511,965 sq km), E South America. to Banco Bradesco Banco Bradesco, short for Banco Brasileiro de Descontos, that is 'Brazilian Discount Bank', is one of the Big Four banks in Brazil, the others being Banco do Brasil, Banco Itaú and Unibanco. Bradesco is the largest private bank in Brazil. S.A.; --A $62 million ($40 million after-tax) charge related to higher redemption The liberation of an estate in real property from a mortgage. Redemption is the process by which land that has been mortgaged or pledged is bought back or reclaimed. It is accomplished through a payment of the debt owed or a fulfillment of the other conditions. estimates related to the Membership Rewards program outside the U.S.; Significant items in the year-ago quarter included: --A $113 million ($73 million after-tax) benefit from the recovery of September September: see month. 11th related insurance claims; --An $87 million tax benefit resulting from an IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. audit of previous years' tax returns. This year's results from continuing operations included $53 million ($34 million after-tax) of reengineering Using information technology to improve performance and cut costs. Its main premise, as popularized by the book "Reengineering the Corporation" by Michael Hammer and James Champy, is to examine the goals of an organization and to redesign work and business processes from the ground up costs related to restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). efforts in the Company's finance, international card and business travel areas. Year ago reengineering costs totaled $114 million ($74 million after-tax). Discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. Discontinued operations for the quarter reflected a loss of $27 million, primarily from the sale of the Company's international banking operations in Brazil. The year ago period reflects income from discontinued operations of $153 million primarily related to Ameriprise Financial Ameriprise Financial, Inc. (NYSE: AMP) is a company offering financial advice and products. It is the successor to American Express Financial Advisors (AEFA), which was a subsidiary of the American Express Company. , Inc., which is no longer part of American Express. Segment results The following discussion of second quarter results presents U.S. Card Services The software support for PC Cards. PC Card applications talk to Card Services. See PC Card. segment results on a "managed basis," as if there had been no cardmember lending securitization Securitization The process of creating a financial instrument by combining other financial assets and then marketing them to investors. Notes: Mortgage backed securities are a perfect example of securitization. May also be spelled as "securitisation. transactions and to reflect certain tax-exempt tax-ex·empt adj. 1. Not subject to taxation, as the capital or income of a philanthropic organization. 2. Producing interest that is exempt from income tax: tax-exempt bonds. n. investment income as if it had been earned on a taxable basis. This is the basis used by management to evaluate operations. For further information about managed basis and reconciliation of GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). and managed information, see the "Managed Basis" section below. The International Card & Global Commercial Services, Global Network & Merchant Services Merchant services is the name given in the United States to a broad category of financial services intended for use by businesses. In its most specific use, it usually refers to the service that enables a business to accept a transaction payment by use of the customer's credit or , and Corporate & Other segment results below are presented on a GAAP basis. U.S. Card Services reported second quarter net income of $616 million, up 29 percent from $477 million a year ago. Total revenues for the second quarter increased 14 percent to $3.7 billion, reflecting growth in spending and borrowing by U.S. consumers and small businesses. Total expenses increased 9 percent. Marketing, promotion, rewards and cardmember services expenses increased 15 percent, reflecting greater rewards costs and marketing and promotion activities. Provisions for losses declined 17 percent due to lower write-offs which benefited from last year's bankruptcy bankruptcy, in law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most legislation and improved collections. International Card & Global Commercial Services ("ICGCS") reported second quarter net income of $225 million, unchanged from the prior year. The benefit of higher business volumes and the segment's share of the Brazilian gain were offset by higher provision expenses, greater Membership Rewards-related costs, and a substantially higher effective tax rate. Total revenues for the second quarter increased 9 percent over the year-ago period to $2.4 billion. Strong growth in spending and borrowing by Cardmembers more than offset a decline in travel commissions and fees. Second quarter expenses increased 7 percent over the year-ago period to $2.1 billion. The increase reflected a significantly higher provision for losses and benefits that was driven by increased write-offs in international markets, primarily Taiwan Taiwan (tī`wän`), Portuguese Formosa, officially Republic of China, island nation (2005 est. pop. 22,894,000), 13,885 sq mi (35,961 sq km), in the Pacific Ocean, separated from the mainland of S China by the 100-mi-wide (161-km) Taiwan , and higher cost of funds Cost of Funds The interest rate paid on an outstanding loan. Notes: Money isn't free! Cost of funds is the cost of borrowing money. See also: Interest Rate Cost of funds Interest rate associated with borrowing money. related to investment certificates sold through American Express Bank. Expenses also included the previously mentioned charge related to the Membership Rewards program outside the U.S. These items were partially offset by a $119 million ($109 million after-tax) gain on the sale of the card operations in Brazil, which were reflected as a contra-expense. Last year's second quarter included a $33 million benefit from the IRS audit of tax returns that was mentioned earlier. Global Network & Merchant Services reported second quarter net income of $200 million, up 29 percent from $155 million a year ago. Total revenues for the second quarter increased 14 percent over year-ago levels to $789 million. The increase reflects continued strong growth in billed business, offset by the impact of a decline in discount rate. Bank partners that issue cards on the American Express network added 2.6 million cards-in-force from a year ago. Total cards-in-force at the end of the quarter also includes an additional 1.3 million cards transferred from ICGCS in connection with the signing of an independent operator agreement with Banco Bradesco S.A. Spending on Global Network Services cards increased 31 percent from a year ago. Total expenses increased 6 percent from year-ago levels to $474 million. Marketing and promotion expenses increased 7 percent. Second quarter expenses are net of $25 million ($22 million after-tax) of the previously mentioned Brazilian gain. This benefit was substantially offset by an adjustment in the amortization expenses relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc an overseas joint-venture. Corporate & Other reported second quarter net expenses of $69 million, compared with net income of $3 million a year ago. The year ago quarter reflects $112 million of the previously mentioned September 11th insurance recovery and $54 million of the previously mentioned tax benefit resulting from an IRS audit of previous years' tax returns. Managed Basis For U.S. Card Services, managed basis means the presentation assumes there have been no securitization transactions, i.e. all securitized securitized Of, related to, or being debt securities that are secured with assets. For example, mortgage purchase bonds are secured by mortgages that have been purchased with the bond issue's proceeds. cardmember loans and related income effects are reflected as if they were in the Company's balance sheet and income statements, respectively. The Company presents U.S. Card Services information on a managed basis because that is the way the Company's management views and manages the business. Management believes that a full picture of trends in the Company's cardmember lending business can only be derived de·rive v. de·rived, de·riv·ing, de·rives v.tr. 1. To obtain or receive from a source. 2. by evaluating the performance of both securitized and non-securitized cardmember loans. Asset securitization is just one of several ways for the Company to fund cardmember loans. Use of a managed basis presentation, including non-securitized and securitized cardmember loans, presents a more accurate picture of the key dynamics of the cardmember lending business, avoiding distortions due to the mix of funding sources at any particular point in time. The Company does not currently securitize Securitize The practice of a company selling accounts receivables or other debts owed to it. The third party that buys the debt assumes ownership of it and the responsibility for collecting the debts, and keeps the repayments when made. international loans. Irrespective of irrespective of prep. Without consideration of; regardless of. irrespective of preposition despite the funding mix, it is important for management and investors to see metrics metrics Managed care A popular term for standards by which the quality of a product, service, or outcome of a particular form of Pt management is evaluated. See TQM. , such as changes in delinquencies and write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. rates, for the entire cardmember lending portfolio because they are more representative of the economics of the aggregate cardmember relationships and ongoing business performance and trends over time. It is also important for investors to see the overall growth of cardmember loans and related revenue in order to evaluate market share. These metrics are significant in evaluating the Company's performance and can only be properly assessed when all non-securitized and securitized cardmember loans are viewed together on a managed basis. The managed basis presentation for U.S. Card Services also reflects an increase to interest income recorded to enable management to evaluate tax exempt investments on a basis consistent with taxable investment securities. On a GAAP basis interest income associated with tax exempt investments is recorded based on amounts earned. Accordingly, information presented on a managed basis assumes that tax exempt securities Exempt securities Instruments exempt from the registration requirements of the Securities Act of 1933 or the margin requirements of the SEC Act of 1934. Such securities include government bonds, agencies, munis, commercial paper, and private placements. earned income Sources of money derived from the labor, professional service, or entrepreneurship of an individual taxpayer as opposed to funds generated by investments, dividends, and interest. at rates as if the securities produced taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. with a corresponding increase in the provision for income taxes. The following table reconciles the GAAP-basis U.S. Card Services income statements to the managed-basis information.*
U.S. Card Services
Selected Financial Information
(preliminary, millions) GAAP Basis
----------------------------
%
Inc/
Quarters Ended June 30, 2006 2005 (Dec)
-------- ------- -------
Revenues:
Discount revenue, net card
fees and other $ 2,514 $ 2,233 13%
Cardmember lending:
Finance charge revenue 814 587 39
Interest expense 215 140 54
-------- ------- -------
Net finance charge revenue 599 447 34
Securitization income, net 372 296 26
-------- ------- -------
Total revenues 3,485 2,976 17
-------- ------- -------
Expenses:
Marketing, promotion, rewards
and cardmember services 1,106 974 14
Provision for losses 351 367 (4)
Human resources and other
operating expenses 1,108 938 18
-------- ------- -------
Total expenses 2,565 2,279 13
-------- ------- -------
Pretax segment income 920 697 32
Income tax provision 304 220 38
-------- ------- -------
Segment income $ 616 $ 477 29
======== ======= =======
U.S. Card Services
Selected Financial
Information
Securitization Tax Equivalent
(preliminary, millions) Effect Effect Managed Basis
------------- ------------- ---------------
%
Inc/
Quarters Ended June 30, 2006 2005 2006 2005 2006 2005 (Dec)
------ ------ ------ ------ ------ ----- ----
Revenues:
Discount revenue,
net card fees and
other $ 44 $ 51 $ 54 $ 57 $2,612 $2,341 12%
Cardmember lending:
Finance charge revenue 726 618 1,540 1,205 28
Interest expense 257 164 472 304 55
------ ------ ------ ------
Net finance charge
revenue 469 454 1,068 901 19
Securitization income,
net (372) (296) - - -
------ ------ ------ ------ ------ ------
Total revenues 141 209 54 57 3,680 3,242 14
------ ------ ------ ------ ------ ------
Expenses:
Marketing, promotion,
rewards and
cardmember services 9 (1) 1,115 973 15
Provision for losses 127 210 478 577(17)
Human resources and
other operating
expenses 5 - 1,113 938 19
------ ------ ------ ------
Total expenses $ 141 $ 209 2,706 2,488 9
------ ------ ------ ------ ------ ------
Pretax segment income 54 57 974 754 29
Income tax provision $ 54 $ 57 $ 358 $ 277 29
------ ------ ------ ------
* Amounts herein reflect certain reclassifications as noted in the
Company's Form 8-K filed with the SEC dated April 5, 2006.
Pro Forma ROE The Company's consolidated return on equity (ROE) is calculated on a trailing 12-month basis using reported net income over average total shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. (including discontinued operations). The Company also reports pro forma ROE, which is determined on a trailing 12-month basis using income from continuing operations (which excludes discontinued operations) over the average month-end shareholders' equity at September 30, 2005 through June June: see month. 30, 2006. Management believes pro forma ROE is an important measure because it reflects performance of the Company's continuing businesses by excluding the impact of Ameriprise Financial, Inc. and American Express Tax and Business Services, Inc., which were disposed dis·pose v. dis·posed, dis·pos·ing, dis·pos·es v.tr. 1. To place or set in a particular order; arrange. 2. of as of September 30, 2005. ROE Pro Forma ROE Trailing 12-months net income: Trailing 12-months income from $3.6 billion continuing operations: $3.5 billion Trailing 12-months average Average month-end shareholders' equity total shareholders' for the period from September 30, 2005 equity: $12.0 billion through June 30, 2006: $10.5 billion ROE: 29.8% Pro forma ROE: 33.1% American Express Company (www.americanexpress.com) is a leading global payments, network, travel, and banking company founded in 1850. Note: The 2006 Second Quarter Earnings Supplement, as well as CFO See Chief Financial Officer. Gary Gary, city (1990 pop. 116,646), Lake co., NW Ind., a port of entry on Lake Michigan; inc. 1909. Gary was founded by the U.S. Steel Corporation, which purchased the land in 1905 and landscaped it for a city. Crittenden's presentation from the investor conference call referred to below, will be available today on the American Express web site at http://ir.americanexpress.com. An investor conference call to discuss second quarter earnings results, operating performance and other topics that may be raised during the discussion will be held at 5:00 p.m. (EST EST electroshock therapy. EST abbr. electroshock therapy ) today. Live audio of the conference call will be accessible to the general public on the American Express web site at http://ir.americanexpress.com. A replay of the conference call also will be available today at the same web site address. This release includes forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , which are subject to risks and uncertainties. The words "believe," "expect," "anticipate," "optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op ," "intend," "plan," "aim," "will," "may," "should," "could," "would," "likely," and similar expressions are intended to identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. The Company undertakes no obligation to update or revise any forward-looking statements. Factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to, the following: the Company's ability to generate sufficient net income to achieve a return on equity on a GAAP basis of 28 percent to 30 percent; the Company's ability to grow its business and meet or exceed its return on shareholders' equity target by reinvesting approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 35 percent of annually-generated capital, and returning approximately 65 percent of such capital to shareholders, over time, which will depend on the Company's ability to manage its capital needs and the effect of business mix, acquisitions and rating agency requirements; consumer and business spending on the Company's credit and charge card products and Travelers Cheques and other prepaid pre·pay tr.v. pre·paid, pre·pay·ing, pre·pays To pay or pay for beforehand. pre·pay  ment n. products and growth in card lending balances, which depend in part on
the ability to issue new and enhanced card and prepaid products,
services and rewards programs, and increase revenues from such products,
attract new cardmembers, reduce cardmember attrition AttritionThe reduction in staff and employees in a company through normal means, such as retirement and resignation. This is natural in any business and industry. Notes: , capture a greater share of existing cardmembers' spending, sustain premium discount rates on its card products in light of regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. and market pressures, increase merchant coverage, retain cardmembers after low introductory lending rates have expired ex·pire v. ex·pired, ex·pir·ing, ex·pires v.intr. 1. To come to an end; terminate: My membership in the club has expired. 2. , and expand the Global Network Services business; the Company's ability to introduce new products, reward program enhancements and service enhancements on a timely basis during 2006; the success of the Global Network Services business in partnering with banks in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , which will depend in part on the extent to which such business further enhances the Company's brand, allows the Company to leverage its significant processing scale, expands merchant coverage of the network, provides Global Network Services' bank partners in the United States the benefits of greater cardmember loyalty and higher spend per customer, and merchant benefits such as greater transaction volume and additional higher spending customers; the continuation continuation - continuation passing style of favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. trends, including increased travel and entertainment spending, and the overall level of consumer confidence; the costs and integration of acquisitions; the success, timeliness and financial impact (including costs, cost savings and other benefits including increased revenues), and beneficial effect on the Company's operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. to revenue ratio, both in the short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. and over time, of reengineering initiatives being implemented or considered by the Company, including cost management, structural and strategic measures such as vendor, process, facilities and operations consolidation, outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. (including, among others, technologies operations), relocating certain functions to lower-cost overseas locations, moving internal and external functions to the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the to save costs, and planned staff reductions relating to certain of such reengineering actions; the Company's ability to reinvest re·in·vest tr.v. re·in·vest·ed, re·in·vest·ing, re·in·vests To invest (capital or earnings) again, especially to invest (income from securities or funds) in additional shares. the benefits arising from such reengineering actions in its businesses; the ability to control and manage operating, infrastructure, advertising and promotion expenses as business expands or changes, including the ability to accurately estimate the provision for the cost of the Membership Rewards program; the Company's ability to manage credit risk related to consumer debt, business loans, merchant bankruptcies and other credit trends and the rate of bankruptcies, which can affect spending on card products, debt payments by individual and corporate customers and businesses that accept the Company's card products and returns on the Company's investment portfolios; bankruptcies, restructurings or similar events affecting the airline or any other industry representing a significant portion of the Company's billed business, including any potential negative effect on particular card products and services and billed business generally that could result from the actual or perceived per·ceive tr.v. per·ceived, per·ceiv·ing, per·ceives 1. To become aware of directly through any of the senses, especially sight or hearing. 2. To achieve understanding of; apprehend. weakness of key business partners in such industries; the triggering of obligations to make payments to certain co-brand partners, merchants, vendors and customers under contractual arrangements with such parties under certain circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or ; a downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. in the Company's businesses and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. negative changes in the Company's and its subsidiaries' credit ratings, which could result in contingent Fortuitous; dependent upon the possible occurrence of a future event, the existence of which is not assured. The word contingent denotes that there is no present interest or right but only a conditional one which will become effective upon the happening of the payments under contracts, decreased liquidity and higher borrowing costs; risks associated with the Company's agreements with Delta Air Lines to prepay pre·pay tr.v. pre·paid, pre·pay·ing, pre·pays To pay or pay for beforehand. pre·pay ment n. $300 million for the future
purchases of Delta SkyMiles rewards points; fluctuations in foreign
currency exchange rates; fluctuations in interest rates, which impact
the Company's borrowing costs and return on lending products;
accuracy of estimates for the fair value of the assets in the
Company's investment portfolio and, in particular, those
investments that are not readily marketable Marketable are securities that can be easily converted into cash. Such securities will generally have highly liquid markets allowing the security to be sold at a reasonable price very quickly. , including the valuation of
the interest-only strip Interest-only strip (IO)A security based solely on the interest payments from a pool of mortgages, Treasury bonds, or other bonds. Once the principal on the mortgages or bonds has been repaid, interest payments stop, and the value of the IO falls to zero. relating to the Company's lending securitizations; the potential negative effect on the Company's businesses and infrastructure, including information technology, of terrorist attacks, disasters or other catastrophic events in the future; political or economic instability instability /in·sta·bil·i·ty/ (-stah-bil´i-te) lack of steadiness or stability. detrusor instability in certain regions or countries, which could affect lending and other commercial activities, among other businesses, or restrictions on convertibility of certain currencies; changes in laws or government regulations; outcomes and costs associated with litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. and compliance and regulatory matters; and competitive pressures in all of the Company's major businesses. A further description of these and other risks and uncertainties can be found in the Company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December December: see month. 31, 2005, and its other reports filed with the SEC.
All information in the following tables is presented on
a basis prepared in accordance with U.S. generally accepted accounting
principles (GAAP), unless otherwise indicated. Amounts herein reflect
certain reclassifications as noted in the Company's Form 8-K dated
April 5, 2006 filed with the Securities and Exchange Commission.
(Preliminary)
AMERICAN EXPRESS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Millions)
Quarters Ended
June 30,
------------------- Percentage
2006 2005 Inc/(Dec)
------- ------- -----------
Revenues
Discount revenue $ 3,292 $ 2,860 15 %
Cardmember lending net
finance charge revenue 867 637 36
Net card fees 533 506 5
Travel commissions and fees 483 502 (4)
Other commissions and fees 642 589 9
Securitization income, net 372 296 26
Other investment and
interest income,net 274 269 2
Other 415 361 15
------- -------
Total 6,878 6,020 14
------- -------
Expenses
Marketing, promotion, rewards
and cardmember services 1,671 1,445 16
Human resources 1,276 1,268 1
Provision for losses and benefits:
Charge card 192 234 (18)
Cardmember lending 406 275 48
Investment certificates and
other 132 123 7
------- -------
Total 730 632 16
Professional services 658 544 21
Occupancy and equipment 365 356 3
Interest 336 232 45
Communications 113 113 -
Other 287 309 (7)
------- -------
Total 5,436 4,899 11
------- -------
Pretax income from continuing
operations 1,442 1,121 29
Income tax provision 470 261 80
------- -------
Income from continuing operations 972 860 13
(Loss)/Income from discontinued
operations, net of tax (27) 153 #
------- -------
Net income $ 945 $ 1,013 (7)
======= =======
# Denotes a variance of more than 100%
(Preliminary)
AMERICAN EXPRESS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Billions)
June 30, December 31,
2006 2005
------------ ------------
Assets
Cash and cash equivalents $ 7 $ 7
Accounts receivable 36 35
Investments 22 21
Loans 44 41
Other assets 8 10
------------ ------------
Total assets $ 117 $ 114
============ ============
Liabilities and Shareholders'
Equity
Short-term debt $ 15 $ 16
Long-term debt 36 31
Other liabilities 56 56
------------ ------------
Total liabilities 107 103
------------ ------------
Shareholders' equity 10 11
------------ ------------
Total liabilities and
shareholders' equity $ 117 $ 114
============ ============
(Preliminary)
AMERICAN EXPRESS COMPANY
FINANCIAL SUMMARY
(Millions)
Quarters Ended
June 30,
------------------- Percentage
2006 2005 Inc/(Dec)
------- ------- -----------
REVENUES
U.S. Card Services $ 3,485 $ 2,976 17 %
International Card & Global
Commercial Services 2,441 2,248 9
Global Network & Merchant Services 789 691 14
------- -------
6,715 5,915 14
Corporate & Other, including
adjustments and eliminations 163 105 55
------- -------
CONSOLIDATED REVENUES $ 6,878 $ 6,020 14
======= =======
PRETAX INCOME (LOSS) FROM
CONTINUING OPERATIONS
U.S. Card Services $ 920 $ 697 32 %
International Card & Global
Commercial Services 294 244 20
Global Network & Merchant Services 315 245 29
------- -------
1,529 1,186 29
Corporate & Other (87) (65) 34
------- -------
PRETAX INCOME FROM CONTINUING
OPERATIONS $ 1,442 $ 1,121 29
======= =======
NET INCOME (LOSS)
U.S. Card Services $ 616 $ 477 29 %
International Card & Global
Commercial Services 225 225 -
Global Network & Merchant Services 200 155 29
------- -------
1,041 857 21
Corporate & Other (69) 3 #
------- -------
Income from continuing operations 972 860 13
(Loss)/Income from discontinued
operations, net of tax (27) 153 #
------- -------
NET INCOME $ 945 $ 1,013 (7)
======= =======
# Denotes a variance of more than 100%.
(Preliminary)
AMERICAN EXPRESS COMPANY
FINANCIAL SUMMARY (CONTINUED)
Quarters Ended
June 30,
------------------- Percentage
2006 2005 Inc/(Dec)
------- ------- -----------
EARNINGS PER COMMON SHARE
BASIC
Income from continuing operations $ 0.80 $ 0.70 14 %
(Loss)/Income from discontinued
operations (0.02) 0.12 #
------- -------
Net income $ 0.78 $ 0.82 (5)%
======= =======
Average common shares outstanding
(millions) 1,217 1,231 (1)%
======= =======
DILUTED
Income from continuing operations $ 0.78 $ 0.69 13 %
(Loss)/Income from discontinued
operations (0.02) 0.12 #
------- -------
Net income $ 0.76 $ 0.81 (6)%
======= =======
Average common shares outstanding
(millions) 1,242 1,254 (1)%
======= =======
Cash dividends declared
per common share $ 0.15 $ 0.12 25 %
======= =======
SELECTED STATISTICAL INFORMATION
Quarters Ended
June 30,
------------------- Percentage
2006 2005 Inc/(Dec)
------- ------- -----------
Return on average total shareholders'
equity (A) 29.8% 23.1%
Common shares outstanding (millions) 1,216 1,240 (2)%
Book value per common share(B) $ 8.62 $ 13.84 (38)%
Shareholders' equity (billions)(B) $ 10.5 $ 17.2 (39)%
# Denotes a variance of more than 100%.
(A) Computed on a trailing 12-month basis using reported net income
over average total shareholders' equity (including discontinued
operations) as included in the Consolidated Financial Statements
prepared in accordance with GAAP.
(B) Total shareholders' equity and book value per common share
amounts prior to September 30, 2005 include discontinued
operations reflected in the Company's Consolidated Financial
Statements.
AMERICAN EXPRESS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Millions)
Six Months Ended
June 30,
------------------- Percentage
2006 2005 Inc/(Dec)
------- ------- -----------
Revenues
Discount revenue $ 6,261 $ 5,499 14 %
Cardmember lending net
finance charge revenue 1,596 1,229 30
Net card fees 1,053 1,004 5
Travel commissions and fees 901 924 (2)
Other commissions and fees 1,281 1,147 12
Securitization income, net 758 612 24
Other investment and
interest income,net 549 530 4
Other 811 715 13
------- -------
Total 13,210 11,660 13
------- -------
Expenses
Marketing, promotion, rewards
and cardmember services 3,193 2,768 15
Human resources 2,516 2,455 2
Provision for losses and benefits:
Charge card 401 449 (11)
Cardmember lending 727 570 28
Investment certificates and
other 270 202 34
------- -------
Total 1,398 1,221 14
Professional services 1,219 1,031 18
Occupancy and equipment 711 692 3
Interest 615 433 42
Communications 226 230 (2)
Other 565 621 (9)
------- -------
Total 10,443 9,451 10
------- -------
Pretax income from continuing
operations 2,767 2,209 25
Income tax provision 919 604 52
------- -------
Income from continuing operations 1,848 1,605 15
(Loss)/Income from discontinued
operations, net of tax (30) 354 #
------- -------
Net income $ 1,818 $ 1,959 (7)
======= =======
# Denotes a variance of more than 100%
(Preliminary)
AMERICAN EXPRESS COMPANY
FINANCIAL SUMMARY
(Millions)
Six Months Ended
June 30,
------------------- Percentage
2006 2005 Inc/(Dec)
------- ------- -----------
REVENUES
U.S. Card Services $ 6,665 $ 5,753 16 %
International Card & Global
Commercial Services 4,744 4,394 8
Global Network & Merchant Services 1,494 1,329 12
------- -------
12,903 11,476 12
Corporate & Other, including
adjustments and eliminations 307 184 67
------- -------
CONSOLIDATED REVENUES $13,210 $11,660 13
======= =======
PRETAX INCOME (LOSS) FROM
CONTINUING OPERATIONS
U.S. Card Services $ 1,716 $ 1,400 23 %
International Card & Global
Commercial Services 605 486 24
Global Network & Merchant Services 577 416 39
------- -------
2,898 2,302 26
Corporate & Other (131) (93) 41
------- -------
PRETAX INCOME FROM CONTINUING
OPERATIONS $ 2,767 $ 2,209 25
======= =======
NET INCOME (LOSS)
U.S. Card Services $ 1,162 $ 959 21 %
International Card & Global
Commercial Services 438 417 5
Global Network & Merchant Services 366 266 38
------- -------
1,966 1,642 20
Corporate & Other (118) (37) #
------- -------
Income from continuing operations 1,848 1,605 15
(Loss)/Income from discontinued
operations,net of tax (30) 354 #
------- -------
NET INCOME $ 1,818 $ 1,959 (7)
======= =======
# Denotes a variance of more than 100%.
(Preliminary)
AMERICAN EXPRESS COMPANY
FINANCIAL SUMMARY (CONTINUED)
Six Months Ended
June 30,
------------------- Percentage
2006 2005 Inc/(Dec)
------- ------- -----------
EARNINGS PER COMMON SHARE
BASIC
Income from continuing operations $ 1.51 $ 1.30 16 %
(Loss)/Income from discontinued
operations (0.02) 0.29 #
------- -------
Net income $ 1.49 $ 1.59 (6)%
======= =======
Average common shares outstanding
(millions) 1,224 1,235 (1)%
======= =======
DILUTED
Income from continuing operations $ 1.48 $ 1.27 17 %
(Loss)/Income from discontinued
operations (0.03) 0.29 #
------- -------
Net income $ 1.45 $ 1.56 (7)%
======= =======
Average common shares outstanding
(millions) 1,250 1,259 (1)%
======= =======
Cash dividends declared per common
share $ 0.27 $ 0.24 13 %
======= =======
SELECTED STATISTICAL INFORMATION
Six Months Ended
June 30,
------------------- Percentage
2006 2005 Inc/(Dec)
------- ------- -----------
Return on average total shareholders'
equity (A) 29.8% 23.1%
Common shares outstanding (millions) 1,216 1,240 (2)%
Book value per common share(B) $ 8.62 $ 13.84 (38)%
Shareholders' equity (billions)(B) $ 10.5 $ 17.2 (39)%
# Denotes a variance of more than 100%.
(A) Computed on a trailing 12-month basis using reported net income
over average total shareholders' equity (including discontinued
operations) as included in the Consolidated Financial Statements
prepared in accordance with GAAP.
(B) Total shareholders' equity and book value per common share
amounts prior to September 30, 2005 include discontinued
operations reflected in the Company's Consolidated Financial
Statements.
To view additional business segment financials go to:
http://ir.americanexpress.com
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